- USD/CAD marches toward 1.3600 amid renewed US Dollar’s strength.
- The US economy exhibits a firm footing on the grounds of labor market and consumer spending.
- Expectations for BoC lowering interest rates sooner escalate due to easing price pressures.
The USD/CAD pair rises to 1.3570 in Friday’s European session on a buoyant US Dollar. The Loonie asset is expected to continue its upside move as the appeal for safe-haven assets remains upbeat.
The US Dollar Index (DXY) rose to a fresh two-week high at 104.20 on upbeat Existing Home Sales data for February, released on Thursday. Sales of pre-owned residences rose by 4.38 Million, the most in a year, against expectations of 3.94 Million and the prior reading of 4.00 Million. This demonstrates improving United States economic prospects despite interest rates remaining historically high in the range of 5.25%-5.50%.
Compared with other developed economies, the US economic outlook is stronger due to robust consumer spending and upbeat labor market conditions. The Federal Reserve (Fed) is not expected to rush for rate cuts as inflation remains higher than expected in February, strengthening the US Dollar.
Meanwhile, price pressures in the Canadian economy are decelerating at a faster pace, boosting expectations for the Bank of Canada (BoC) to reduce interest rates sooner.
USD/CAD approaches the horizontal resistance of the Ascending Triangle pattern formed on a daily timeframe, plotted from December 7 high at 1.3620. The upward-sloping border of the aforementioned pattern is placed from December 27 low at 1.3177. The chart pattern exhibits a sharp volatility contraction.
The near-term appeal is bullish as the 20-day Exponential Moving Average (EMA) near 1.3520 continues to provide support to the US Dollar bulls.
The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating indecisiveness among investors.
The Loonie asset would observe a fresh upside if it breaks above December 7 high at 1.3620. This will drive the asset towards May 26 high at 1.3655, followed by the round-level resistance of 1.3700.
On the flip side, a downside move below February 22 low at 1.3441 would expose the asset to February 9 low at 1.3413. A breakdown below the latter would extend downside towards January 15 low at 1.3382.
USD/CAD daily chart
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